Mortgage rates could decrease slightly in the coming days after the Federal Reserve chose to keep overnight borrowing rates steady at their meeting on July 29. This decision may lead to a drop in mortgage rates, which had risen in anticipation of a potential rate hike.

Impact on Mortgage Rates

The average 30-year mortgage rate jumped 14 basis points to 6.65% APR over the past week, with some lenders potentially lowering rates until the next meeting in September. However, any rate drops are likely to be temporary, as central bankers are still expected to raise the federal funds rate in the future.

The federal funds rate determines how much lenders pay to fund loans like mortgages. If this fee is likely to increase, lenders will pass additional costs to borrowers by raising mortgage rates. Speculation around rate hikes was fueled by rising oil prices, which have threatened to drive up inflation again.

Oil Prices and Inflation

Oil prices have been volatile since the war in Iran began heating up, with Brent crude oil prices hitting $102 a barrel last week before falling to $88 on Monday. The Fed’s primary means of controlling inflation is to raise borrowing rates, making lenders prepare for potential rate hikes by adjusting their mortgage rates.

However, the new chair of the Federal Reserve, Kevin Warsh, has been less transparent about the Fed’s decisions, making it more difficult for lenders to predict the direction of overnight borrowing rates. This lack of clarity led some lenders to set mortgage rates as if an increase was coming, even though the Fed ultimately decided to hold rates steady.

Original reporting: KTBS 3 (Shreveport) — read the source article.